JUNO INVESTING ©

Road to riches: why classic cars will always be a good investment

JUNO INVESTING ©
Road to riches: why classic cars will always be a good investment

 

SPRING 2016

By Victoria Wells

You cant put the top down on your shares or admire the paintwork on your bonds. Find out why enthusiasts and investors are putting the pedal to the metal when it comes to classic cars.

When classic cars topped the Knight Frank Luxury Investment Index for the third year running, it simply reinforced what those in the industry already knew: investing in cars is red-hot, and likely to stay that way. The index tracks the performance of luxury investments globally. Using data collected from Historic Automobile Group International (HAGI), classic cars showed annual growth of almost 17 per cent for 2015, 162 per cent over the past five years and
nearly 500 per cent over 10 years. HAGI’s data is based on more than 100,000 recorded transactions of collectors’ vehicles. 

Full-throttle growth

Much of the growth in the value of classic cars and the booming collectors’ market has come over the last three years, according to Robbie Richards of Melbourne auction house Mossgreen. Richards, who heads up the Department of Collectors’ Cars, Motorcycles and Automobilia, says the market is expanding rapidly. “Given what interest rates and other investment fields are doing, people look upon a classic car and say there’s good growth in the area and it’s something you can use and enjoy.”

Hamilton businessman and owner of the Classics Museum, Tom Andrews, has been collecting cars for most of his 65 years. His Waikato museum boasts vehicles from the US, UK and Europe, spanning the 20th century and dating back to 1908. Although his collection is held in trust and not intended for sale, he’s aware of the growing market for classic cars. 

“It’s gone through the roof. We’ve got cars that I paid $30,000 for, which are now worth $150,000. The value of them has skyrocketed; the number of people collecting them has skyrocketed,” Andrews says.

Safety features

Driving the high values is the perception of classic cars as a safe bet. Richards says his clients have pulled money out of investments that they haven’t felt confident in. 

“They’re maybe baby boomers who have the money and say: ‘Look, I’ve always wanted this car and I’m just going to do it.’”

Simon Hammer is a former motor engineer, specialising in classic cars, who now sources vehicles for clients around the world, from his base in France. 

He says prices today reflect scarcity and demand. “These cars get rarer and rarer. You can’t just reproduce these items. Whereas an investment such as precious metals is just a commodity and you can produce more.” 

What’s hot now? 

A ‘classic car’ is generally thought of as an automobile from the 1940s-60s; but it can also be any car of historical importance. Hammer says escalating interest in cars from the 1970s onwards provides a strong case for broadening the definition. 

“The ones that have really moved in the last 10 years have got to be the 911 Porsches – the air-cooled Porsches from the 60s and going right through to the late 80s or early 90s. They’re very desirable and have probably tripled in value in the last 10 years, which is colossal,” he says.

Richards has seen similar gains with Porsches, and says Aston Martins remain popular too. 

“A standard Aston Martin DB4 [1958-63], a non-Zagato-bodied car… they might be sitting at around AU$1 million at the moment. As little as three or four years ago, they might have been half that price.”

As well as rarity and quality, Richards says provenance is a key factor when considering a car. For example, the car might have been part of a campaign or a demonstrator model for an executive. Or it could even have been bought by a rock star. 

But there’s good news for those with a more modest budget. You don’t have to buy a very valuable car to have fun and make money, says Andrews. 

“It could be a little 1950s Morris Minor. A lot of the people in my classic-car club have NZ$4,000-NZ$5,000 cars and they have a lot of fun. What staggers me is that a whole lot are going up in value. Twenty years ago, a little [Ford] Anglia would have sold for NZ$500. Five years ago, they’d have gone up to NZ$4,000-NZ$5,000. Then one sold on Trade Me about a month ago for NZ$25,000.” 

What to buy

All three experts warn against buying anything with a rust problem, but say restoration is an option. In fact, Hammer explains leaving cars well alone can add value, because originality is so important. He advises protecting the car and keeping it in an atmosphere without too much humidity.

Richards agrees that cars in original condition are sought-after. He sees cars in really bad condition that might sell for prices almost comparable with similar models that had been fully restored.

Last year, Andrews found a 1938 Bugatti Type 57 Ventoux Coupe that had been in a French barn for 60 years. He paid just under NZ$500,000 for it and shipped the car to New Zealand to be restored. The car was old, but in incredibly good condition. 

“It had never been pulled apart, it was all ‘matching numbers’ – it had the original motor, gearbox, differentials, and everything else. That means nothing had been changed… those ones are more valuable than anything,” Andrews says. 

Passionate investors

The enjoyment of owning (and driving) a classic car, coupled with rising values, makes them an attractive investment option. 

Even those without any classic-car knowledge can buy something that appeals to them and reap the benefits, says Hammer. “I’m a believer in buying something you like. Because if you like it, and love it, then you’ll take care of it.” 

Richards agrees and says while purchasers have the investment potential in the backs of their minds, they primarily talk about the enjoyment and the excitement around the car.

“It’s about enjoying life and having fun,” says Andrews.